Questions raised over new $2.6bn price tag to bring a new drug to market

By Zachary Brennan contact

- Last updated on GMT

The quest to find the average cost of developing a drug may not be so easy
The quest to find the average cost of developing a drug may not be so easy

Related tags: Drug development, Pharmacology

The Tufts Center for the Study of Drug Development is out with a new study claiming that the average cost of bringing a new drug to market is around $2.6bn, though some are saying that number seems inflated.

The new analysis, which updates similar Tufts CSDD analyses, was developed from information provided by 10 pharmaceutical companies on 106 randomly selected drugs that were first tested in human subjects from 1995 to 2007.

Tufts CSDD previously estimated the cost of developing a new drug in 2003 at about $800m, which would mean the cost of R&D has skyrocketed more than 140% between the two studies.

According to Joseph DiMasi, director of economic analysis at Tufts CSDD and principal investigator for the study, the rising costs can be attributed to increased clinical trial complexity, larger clinical trial sizes, higher cost of inputs from the medical sector used for development, greater focus on targeting chronic and degenerative diseases, changes in protocol design to include efforts to gather health technology assessment information, and testing on comparator drugs to accommodate payer demands for comparative effectiveness data.

The study also points to the generally disappointing rates of success in drug development. Of the 106 drugs studied, 7.1% were approved, while 80% discontinued and about 12% were still in some phase of testing when the study ended.

But whereas CROs and sponsors seem to hone in on the importance of cutting costs with tighter deadlines, the Tufts study seems to argue that time is becoming less of a factor for drug development costs.

DiMasi said, “Changes in the overall time profile for development and regulatory approval phases had a modest moderating effect on the increase in R&D costs. As a result, the time cost share of total cost declined from approximately 50% in previous studies to 45% for this study​.”

Backlash

Critics of the Tufts study are claiming that the data is nothing more than a ploy by Big Pharma to justify high price tags for new drugs.

Doctors without Borders criticized the report for not being independent, noting: “The pharmaceutical industry-supported Tufts Center for the Study of Drug Development claims it costs US$2.56 billion to develop a new drug today; but if you believe that, you probably also believe the earth is flat​.”

GlaxoSmithKline’s CEO Andrew Witty himself says the figure of a billion dollars to develop a drug is a myth; this is used by the industry to justify exorbitant prices​,” Rohit Malpani, Director Policy and Analysis of the advocacy group says. “We need to ask ourselves, if the CEO of a top pharmaceutical company says it’s a myth that it costs a billion dollars to develop a drug, can we really take this new figure 2.56 billion seriously?

Similarly, the non-profit Knowledge Economy International says​ the study “is part of a public relations campaign by the drug companies to justify high prices​,” and “is long on propaganda, and short of details​.”

And since the entire estimate was based upon the costs of the trials, “we don't have any idea of what the sample looked like​,” KEI adds. “It is strategic for Tufts to suppress many of the key details, since they could be compared to actual data on drug development​.” 

The average cost is not accurate for smaller drug and biotech companies bringing drugs through their pipeline via smaller CROs.

CRO Clinipace CEO Jeff Williams told us: "While the Tufts analysis always spawns interesting debate on exactly what should and should not be included in this calculation, the fact is drug development is a costly endeavor any way you cut it. In the small to medium biopharma clients that we serve, I am confident the number is much lower.In many cases, these drugs can get through development for under $500M. This is because they have a shorter discovery phase and process far fewer candidates.

"Often they in-license a compound and avoid a prolonged discovery cycle all together.While it's true that even an in-licensed drug carries a sunk cost prior to arriving at the doorsteps of a developer, it does not carry the cost of an entire discovery program you might typically find in a large pharmaceutical company...On the other hand, we have seen investigator grants costs, particularly in the US, increase faster than nominal inflation, but we have seen this offset by more global studies that include lower-cost regions and muted European inflation.​"

Related topics: Clinical Development

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